48% of US adults admitted to saving less money in 2024 than compared to 2023, according to a Yahoo Finance-Marist Poll survey. Inversely, 44% of people surveyed think they'll now save more in 2025.
Vanguard Head of Personal Investor Cash Brandon King comes on Wealth to speak with Brad Smith about the types of savings accounts available to help build up emergency and retirement funds — including high-yield savings accounts — or saving for your child's education.
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According to a Yahoo Finance Maris poll, 48% of surveyed banked US adults said they saved less in 2024 compared to the year prior. But on an optimistic note, 44% say that they think they'll save more this year. So, we want to help those out with some saving strategies everyone should be following here. Here with more, we've got Brandon King, Vanguard head of personal cash, as part of our savings series, brought to you by Synchrony. Brandon, great to have you here. So let's just start with basic savings accounts. What savings accounts should you have?
Yeah, and I think it's really focusing on what you can control, right? And it is having a saving strategy and to your point, what types of accounts, look for ones with competitive yields. Right? There are many accounts out there and many different providers, but a lot of times clients aren't earning what they deserve. And looking for options out there that provide you a competitive yield is something that all uh consumers and savers should uh be looking for.
How much should you have in an emergency savings account? And what kind of account is best for that type of of fund?
Sure. So there's lots of different types of accounts, um, but looking at the emergency savings fund in general, there's really two things that you should be thinking about for your emergency fund. First is your uh to cover against what we call like spending shocks. So spending shocks, uh, you should have about $2,000 or half a month of household expenses to cover that spending shock. And for income shocks, about three to six months of household expenses. And and again, really looking for higher yielding options. Like high yield savings accounts or cash management accounts. Uh, Vanguard's cash plus account is is a great example of something where you can get 3.65% on your cash and you can save for some of those emergencies we just talked about.
How about when you're trying to make sure that you're saving for education? What are the ways, the building blocks, to go about that?
Yeah, and so that's a slightly different type of use case. Uh, and so investors should really be thinking about what the purpose of the education uh goal is, right? And so when you think about traditional savings accounts, those are things for more short-term expenses or unexpected, um, um, unexpected needs. But for 529s or your education savings, really that's a that's for your child's education and you can get some tax benefits, um, and also have a more longer-term outlook. And so thinking about what investments are involved in those type of accounts are uh more important uh and and should probably consider some of those options if you're talking about education savings.
So, how how much does Vanguard recommend that you save for retirement? And I I I say that and I ask that knowing that the number is different for everyone based on your lifestyle.
Yeah, you're you're right, right. The the number is different based on your uh based on your lifestyle. I think the biggest thing is really taking advantage of what your employer has to offer, right? If you're working for an employer and they offer a 401k, and especially a 401k match, make sure you're taking advantage of that match, right? Uh if if they're matching up to 5% of your contributions, make sure you're doing as at least that amount so that you can take advantage of the additional uh returns you can get from the match of your employer.
As we think about the the delta between last year and this year, and how people are going about savings, how do they know when to start and where it's effective to start tapping some of those savings over time as well?
Yeah, I think really what you want to do is make sure you have a plan. And so being proactive and setting aside that money, whether it's on a recurring basis, or whether it's uh taking advantage of a lump sum, like a tax return, to really jump start that savings. And making sure you're intentional, you have a plan, is super important. Because what will actually happen is if you don't have that plan and you come into an unexpected expense, um or uh potentially one of those spending shocks we we we discussed, a lot of times people will either go into debt or dip into their retirement assets to fund that expense. And that can have a tremendous impact on the true cost of that expense, whether it's incurring interest debt, um or whether it is impacting your long-term uh investment outlook, or incurring taxes, penalties or fees.
What is the mindset that people need to have when they're saving for things like homes, or larger purchases, or even weddings?
Yeah, I I I think I think it's kind of going back to that plan. So really determining, hey, how much do I actually need to save and by when? And then creating that plan to get there. What can you do in terms of your personal expenses to potentially cut back, save a little bit at a time, and look for those lump sum payments. Um, but at least having a plan and knowing what you're saving for, how much you need to save, and making sure that it's in an account that can earn the best returns so you can get the most out of your savings dollars.